Traditions Help Protect Bridgestone From Threat of Corporate Raiders
September 7, 2000

By BILL SPINDLE
Staff Reporter of THE WALL STREET JOURNAL

TOKYO -- When Firestone Tire & Rubber Co. fell victim to a major tire
recall back in the 1980s, the company was taken over by a foreign tire
maker, Bridgestone Corp. of Japan. So now that Bridgestone has been
hobbled by the current recall at its Bridgestone/Firestone unit, why is
no one talking about the same fate befalling the Japanese tire maker?

One big reason: Despite significant changes in
the ownership of corporate Japan, traditional
shareholding relationships still protect big
companies from unwanted suitors, according to
investment bankers and fund managers. "It
would be very hard to take over Bridgestone," says Ed Merner, manager
of the Atlantis Growth Fund and a longtime investor in Japan. "It would
be quite a coup if someone did it."

On the surface, the Firestone recall has triggered the sort of crisis that
might make Bridgestone, which controls half of Japan's tire market, an
attractive target for competitors looking to move into Japan. The
problems in the U.S., where Bridgestone gets about 40% of its
revenue, have led to a sell-off of the parent company's shares that has
cut its market value almost in half, to about $11 billion, and called into
question the current management's ability to deal with the problems
abroad. Meanwhile, Bridgestone remains a dominant brand in Japan,
where foreign companies barely have a presence.

Some industry observers don't rule out the possibility of a foreign tire
maker eventually attempting to buy a stake in Bridgestone, if the
company's problems in the U.S. continue to snowball, weakening its
bottom line over time. A Bridgestone spokesman said the company has
no plans to sell any part of itself.

But don't bet on anyone making a run at buying Bridgestone soon,
bankers here say. For one thing, even Bridgestone's shrunken market
value would make it a very large acquisition for other major tire makers.
The market value of Goodyear Tire & Rubber Co., for example, is only
about one-third that of Bridgestone. And if leading tire companies such
as Goodyear or France's Groupe Michelin wanted to buy into
Bridgestone, they might face opposition from U.S. regulators concerned
about one company dominating too much of the North American tire
market.

But perhaps the biggest obstacle would be the fortress of shareholders
loyal to management surrounding the Japanese company. These include
a scion of the founding Ishibashi family, who owns a 3% stake, and a
philanthropic foundation that is Bridgestone's largest single shareholder
with a 9% stake.

Bridgestone's secure position shows how, despite dramatic changes in
the ownership of corporate Japan, the management of most major
companies is still protected from overt kinds of shareholder pressure
such as the threat of a takeover. As with many big Japanese companies,
foreign ownership has climbed dramatically at Bridgestone, to 23% now,
compared with only 2% a decade ago. But most of Bridgestone's
largest shareholders aren't likely to sell against management's wishes,
no matter how grim the situation becomes, according to industry
observers.

The Ishibashi Foundation, which runs several art museums and
conducts other philanthropic activities, is forbidden by law to sell the
core Bridgestone holdings it received from company founder Shojiro
Ishibashi, according to Hideyoshi Kita, a former Bridgestone employee
who is now managing director of the foundation. Industry officials also
said that major Japanese institutional shareholders, such as Sumitomo
Bank Ltd., which owns 3.7% of the company, probably wouldn't sell to
a hostile bidder. A spokeswoman for Sumitomo declined to comment.

Overall, analysts say that at least one-quarter of Bridgestone is owned
by shareholders who wouldn't act against the wishes of the current
management.

A move to buy Bridgestone "would be Japan's first hostile takeover bid,"
says Chris Redl, an analyst with UBS Warburg in Japan. "And believe
me, it would be hostile."